Sheikh Abdullatif Al Shelash Discusses How Saudi Home Loans Made Mortgages a Reality in Saudi Arabia

Abdullatif Al Shelash is on the board of Saudi Home Loans and says securing a home loan in Saudi Arabia used to be a bit difficult, but now it has gotten easier. Local laws surrounding the mortgage approval process have relaxed, giving way to a key part of Saudi Home Loans’ success in the market, according to Abdullatif Al Shelash

“Banks are becoming more understanding of the real estate markets,” Sheikh Abdullatif Al Shelash says. “Previously, if you wanted to purchase or get a mortgage on a home, they will take the assets or the home of no value, when considering the mortgage applications. Right now, I think including the assets as being the primary value of giving out the loan, on top of that, the income of the person, the household, or including also the co-ownership of the loan has been part of the laws in Saudi, where the husband and the wife, actually both their income, is pledged toward really getting their loan.”

Saudi Home Loans Takes Mortgages to Next Level

A 2021 Saudi Home Loans annual board members report states that Saudi Home Loans has become one of the leading companies in the field of Islamic funding for meeting the basic housing needs of clients in the Saudi market. Saudi Home Loans provides them with the most appropriate solution to finance their dream houses in compliance with Islamic Sharia, says the report.

Saudi Home Loans was among the initial companies to promote home finance, according to Abdullatif Al Shelash. After all, mortgages in Saudi Arabia are still a fairly new thing. The government just started allowing them in 2012. That year, reported that Saudi Arabia was spending about $500 billion to build infrastructure and industry in the kingdom, and it was part of a major adjustment for the kingdom’s home finance market. 

Abdullatif Al Shelash says he used to have investors in 2004 and 2005 who would come to Riyadh, the Saudi capital, wanting to purchase a 400-square-meter home for 800,000 Saudi riyals (approximately $213,000).

“And they’re coming up with cash on that. And I tell them, ‘Well, why buy cash?’ Just put 80,000 [riyals] and mortgage the rest for 20 years, and whatever [additional] cash you have, just go and buy another land adjacent to it,” Abdullatif Al Shelash says. “That’s a much better use for your cash. Since I am a finance major, I’m advising them on this, even though I am the developer. But in the end, it’s coming to me as a developer as cash, either from the mortgage provider or the mortgage.”

While Abdullatif Al Shelash acknowledges some clients would prefer not to be tied to debt for 20 years, he says it’s a better use of one’s cash.

“There’s going to be more appreciation,” Abdullatif Al Shelash says. “The houses that you purchased in 2005 for 800,000 Saudi riyals right now are valued at 3 million Saudi riyals. So they have made a tremendous wealth, and they only paid 80,000 and start paying monthly mortgage installments.”

Abdullatif Al Shelash explains that they took the cash or the equity they had and put it in land that appreciated to almost 2.5 million [riyals]. “And so they have made tremendous wealth within the last 15 years, and they attribute all of their wealth to the advice that they have received during that time,” Abdullatif Al Shelash says. “And I have many friends of them, actually. I go and see them, visit them, and they go and tell, ‘Really, we made our wealth because of really the good advice that you have given us at an excellent time.’”

Since Saudi Home Loans’ inception in 2008, Abdullatif Al Shelash says the World Bank has been deeply interested in promoting homeownership as well as home financing in Saudi Arabia. “The brand of the World Bank, the International Finance Corporation, took a share in the company, Saudi Home Loans,” Abdullatif Al Shelash says. “They also financed the company to provide these loans. I was instrumental in working with bringing IFC to this company and having the IFC supporting home loans and home ownership in Saudi.”

The majority of Saudi residents were renting, with just 22% being official homeowners, when Saudi Home Loans made its debut. According to Al Shelash, that figure has skyrocketed since then, with roughly 60% of Saudis owning homes since 2020. 

Abdullatif Al Shelash Says Saudi Home Loans Remains an Industry Leader

“This changed the concept and the minds of people that ‘I don’t need to wait,’” Abdullatif Al Shelash says. 

Saudi Home Loans continues to utilize innovation to stay ahead of the home loan trends. It has launched six new products, including murabaha, an Islamic financing model for fixed rent and mortgages, in addition to commercial real estate financing. Saudi Home Loans has also developed contracting agreements with organizations in England and abroad, expanding its global footprint. The Saudi Home Loans risk department created new policies and procedures for managing various risks, including operational, credit, liquidity, and market risks. 

Abdullatif Al Shelash says Saudi Home Loans going public has been an asset for the brand. 

“Mortgage penetration in Saudi is still in its infancy, it’s at the beginning stage,” Abdullatif Al Shelash says. “You go to any major city globally and you will find the percentage of mortgages will reach to 80%, 85%. Meanwhile, in Saudi, I don’t think that it has reached more than the 5% and 10%. I haven’t looked at the last statistic coming out of [Saudi Arabian Monetary Authority] on mortgage penetration, but there is a tremendous opportunity for a hundred companies like Saudi Home Loans.”